How much is the average default life insurance cover included in a younger working person’s superannuation? It varies but is probably around $150,000. How much is the average mortgage of a young homeowner? Probably around $500,000 to $700,000.

So, if they die or are totally and permanently disabled their family will almost certainly lose their home. And there will be nothing to pay out car loans or fund children’s education.

Most Australians are dangerously underinsured. Studies have shown that over ninety per cent of people have too little life and personal insurance. The default cover in super is nowhere near enough. We insure our homes and cars adequately, why not ourselves?

Young people wishing to be responsible should get advice from a financial adviser to plan and apply for personalised cover of the right type and amount to suit their circumstances.

The good news is that when people are young, insurance is at its most affordable. Between ages twenty-five and thirty-five premiums are at their lowest. At those ages people have lower, though not nil, risk. As we age our health risks, such as cancer increase, and premiums rise.

Another bit of good news is that anyone, including the young family person, can lock in level insurance premiums that rise only with inflation until age sixty or sixty-five.

A further fact making insurance affordable is that some types of cover can be paid for from superannuation, meaning there need not be much personal cost affecting the household budget.

Some young people have the view that “It won’t happen to me”. Yet statistics show that disaster will definitely happen to a small number of young people. So, it could actually be them.

There are four main types of personal insurance cover. Life insurance, or death cover, pays a lump sum if the insured person dies. This can be used to pay out mortgages and other debts, or invested to generate income to support family members especially young children.

Total and permanent disablement insurance (TPD) also pays out a lump sum, if a TPD event occurs. That can be used to provide similar benefits for both the insured person and their family.

Income protection insurance replaces up to three-quarters of a person’s lost income if they are unable to work due to illness or injury. Trauma insurance pays a lump sum on diagnosis of specific serious illnesses. 

A major accident or serious illness can mean high medical bills and long periods away from work without income. The right insurance can make all the difference for a person and their family if something does go seriously wrong.